(Bloomberg) -- Oil extended its winning streak to the longest in almost a decade as the Federal Reserve's wait-and-see approach on interest rate hikes added to a rosier outlook.
Futures rose 0.4 percent in New York, continuing a recovery from a drop of about 40 percent at the end of 2018. Prices have rebounded amid signals that production curbs by the OPEC+ coalition would balance the market. Fed Chairman Jerome Powell's comments that the central bank will be patient before adjusting rates again also reassured investors, said Daniel Ghali, a TD Securities commodities strategist.
“We've seen quite a few positive events since the market was falling off a cliff," Ghali said by telephone from Toronto. “With OPEC seeming committed, the outlook for crude is a lot less gloomy than some people had expected."
Oil is still down about 30 percent since reaching a four-year high in October. Investors should get used to the swings, according to Ghali. Central banks around the globe are withdrawing stimulus, adding volatility across markets, he said.
West Texas Intermediate for February delivery rose 23 cents to $52.59 a barrel on the New York Mercantile Exchange. WTI has risen for nine straight days, and has gained 24 percent on the since hitting a low on Christmas Eve.
Brent for March settlement rose 24 cents to $61.68 a barrel on the ICE Futures Europe Exchange in London, and traded at an $8.77 premium to WTI for the same month. The global benchmark crude has also jumped more than 20 percent since Dec. 24, meeting the common definition of a bull market.
U.S. Stockpiles
The rally has persisted this week despite fast-growing fuel stockpiles. While the Energy Information Administration reported that crude inventories shrank by 1.68 million barrels last week, there were substantial increases in refined products such as gasoline. Overall, the petroleum inventory build was a massive 13.3 million barrels, the second week in a row it jumped by more than 10 million.
The risk of a surplus emerging has stirred Saudi Arabia, OPEC's biggest producer, to try and reassure markets that the cartel and its partners are taking action.
Energy Minister Khalid Al-Falih said in Riyadh on Wednesday that the 1.2 million-barrel-a-day cut promised by the coalition will be more than sufficient to balance the market. He added that he “would not rule out calling for further action of some kind” if the current strategy proves inadequate.
See also: Oil Giant Saudi Aramco to Issue First Global Bond This Year
“The pessimism of market participants at the end of the year was excessive, and so we expected prices to rise,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “However, for a further price increase, a decisive action by OPEC is necessary.”
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--With assistance from Tsuyoshi Inajima, Sharon Cho, Austin Weinstein and Grant Smith.
To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick
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